A homeowner defaults on a $250,000 mortgage. Her lender completes a judicial foreclosure, and the property is sold at auction for $210,000. State law permits the lender to seek further recovery from the borrower for any shortfall when the loan is not fully satisfied by the auction. The lender petitions the court for an additional ruling against the borrower personally — beyond what the auction produced — to recover the $40,000 gap. If the court grants the lender's petition, the lender may garnish wages or bank accounts. What is the lender seeking through that petition?
Correct Answer
C) Deficiency judgment
The auction satisfied $210,000 of a $250,000 loan, leaving a $40,000 shortfall. The lender's petition seeks a court order against the borrower individually for that gap — the personal money judgment available where state law allows is a deficiency judgment.
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Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
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